Hong Kong Failing business community
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By Henrique Schneider
Granted, Hong Kong is still the freest economy on the planet. It also enjoys more democracy today than it has ever experienced before. The student-led protests, however, are about more than just democracy ― they are about freedom. And here, the business community in Hong Kong is failing.
As the United Kingdom handed the territory back to China in 1997, both agreed upon maintaining a free-market economy, individual freedoms and making progress toward full democracy. While it is true that economic freedom remains untouched, the opposite applies with the other areas.
Since 2003, Beijing has been pushing toward more censorship and more state control. In 2003, the mainland pressed Hong Kong to pass a law that violates the guarantee of private ownership. This, cobbled together with a less-than-transparent election for Chief Executive, prompted around 500,000 people to take it to the streets. Also, the right to elect part of its Legislative Assembly has been earned through the protests of 600,000 people.
Recently, Beijing has been pushing Hong Kong to administer “national education” in schools. This subject inculcates the cultural and patriotic values Beijing deems necessary for ensuring its grip over people’s preferences.
It was just last month that China’s Central Government decided that while people from Hong Kong might vote freely, the candidates have to be approved by Beijing.
Each of these interventions by the mainland taken separately might be understandable. However, they are part of a long-term strategy to abolish the “one country, two systems” maxim and replace it by a simple “one country, one system” policy.
Beijing wants to fully incorporate Hong Kong.
The Hong Kong business community seems at ease with Chinese politics. Businesspeople have been loudly saluting before the mainland’s dignitaries. Also, in the last couple of weeks, the business community has taken a very pro-Beijing stance, warning about the negative economic impact of the protests; they have also said that uncontrolled democracy might jeopardize Hong Kong’s stability.
Taken as a short-term perspective, they might be right. However, what the business community so gallantly overlooks is that Hong Kong itself might be in danger.
As Hong Kong was handed back to China, the territory had different competitive advantages over the mainland: its finance and banking sectors, its industry and its geographic location as a logistics hub. Today, China has equaled most of these advantages. Shanghai became almost as important as Hong Kong in global finance and banking. The Pearl River Delta, i.e., the province of Guangdong, has much more industry and is as global as Hong Kong.
While China built up capacity and knowledge, Hong Kong lost almost all its levers against the mainland. With one exception: tourism. But more than half of all tourists come from China anyway.
In other words, Hong Kong is not as important to China as it used to be. The less important it becomes, the less China has to lose by fully incorporating it. That is the big picture that the business community is missing.
Instead of thinking strategically about its own future, the Hong Kong business community is happy being part of a shortsighted pro-Beijing cartel. It forgets that Hong Kong’s main strength is its freedom and not its stability. The business community is, however, in collusion with those sacrificing freedom at the altar of stability.
The Hong Kong business community should not delude itself with the idea that past economic success will be the future of Hong Kong. Business leaders should ask why they are so shy in taking responsibility for the place that made them successful in the first place.
“Really? Hong Kong was once British?” Adelaide, a friend of this author, once wondered as both wandered about the place. Perhaps she was not just wondering, but having a premonition about the future; maybe she would ask in the future, “Really? Hong Kong was once free?”
Henrique Schneider is Chief Economist of the Swiss Federation of Small and Medium Enterprises. He can be reached at hschneider@gmx.ch.